ARMArm Holdings plc
Is the business good?
The checks split: earnings fully cash-backed (2.9×), but margins compressing.
Operating profit is fully backed by cash. Conversion is improving vs a year ago.
Negative operating leverage, costs are rising faster than sales, squeezing margins as it grows.
Margin-driven, fat margins on slower asset turns. ROE 11% = margin × turnover × leverage.
Unless marked, from derived.
Where this answer is blind. The F-score rewards improvement, so an already-elite company can score mid-pack.
How good a business is ARM?
Arm Holdings plc earns 15% on the capital it employs against a 9.0% cost of capital, so the business is worth more the bigger it gets.
Return on invested capital · cost of capital 9.0% · 5.6 points above what the capital costs: growth creates value
- Operating margin
- 17%
Operating margin · Semiconductors median 7.5% · 12 months to Q1 2027
- Cash conversion
- 2.89×
Cash conversion · 1.69× a year ago · operating cash flow covers the operating profit after tax
- Share count, year on year
- +1.2%
Share count, year on year · shareholders own a smaller slice than a year ago
| Year | Operating margin |
|---|---|
| FY2022 | 23% |
| FY2023 | 25% |
| FY2024 | 3.4% |
| FY2025 | 21% |
| FY2026 | 18% |
Details›
- Gross margin12 months to Q1 2027
- 98%
- Operating margin12 months to Q1 2027
- 17%
- Net margin12 months to Q1 2027
- 20%
- Free cash flow margin
- 29%
- R&D as % of revenue
- 57%
- Revenue, trailing twelve months
- $5.16B
- Free cash flow, trailing twelve months
- $1.51B
- Net income, trailing twelve months
- $1.04B
- Return on invested capitaloperating profit after tax ÷ debt + equity − cash
- 15%
Margins, capital and share counts from the statements as filed with the SEC; cash conversion is operating cash flow over operating profit after tax.